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Foxconn

Robots don’t complain. Or demand higher wages, or kill themselves

Aug 6th 2011 | HONG KONG | from the print edition

WITH more than 1m workers, Foxconn may be China’s largest private employer. The secretive electronics giant is renowned for taking designs from Western firms, such as Apple, and using cheap labour to crank them out in huge quantities. But its fantastically successful business model seems to have run its course.

At a closed retreat in late July, Terry Gou, the chief executive of the Taiwanese-owned company (which is also known as Hon Hai), unveiled a plan to hire 1m robots by 2013. In a public statement, Foxconn talked about moving its human workers “higher up the value chain” and into sexy fields such as research. But at least some will surely lose their jobs.

Robots are easier to manage. Several Foxconn employees have committed suicide; in the latest case, a 21-year-old threw himself off a building in late July. In May an explosion at a new factory in Chengdu killed three employees and, it is believed, caused delays to the production of Apple’s iPads. To pacify its increasingly restive workers, Foxconn has repeatedly bumped up their wages, improved facilities, provided counselling and swathed its factories with nets to catch anyone leaping from a window. All this costs money.

China’s competitive edge has long been its vast supply of cheap hands. But as the country grows richer, skills shortages are driving wages rapidly up. Foxconn’s decision to alter its mix of capital and labour is thus logical, and mirrors what many smaller firms are already doing.

But the switch may not be smooth. Foxconn’s expertise has been in running well-regimented armies of people making goods for highly visible global companies. It is not known to have skills in running automated production lines; and moving in this direction will put it in competition with companies that do.

Rising wages are good for Chinese workers, and for firms that want to sell them things. But they also raise questions. Do they spell an end to the cheap “China price” for manufactured goods? Will multinational firms shift production elsewhere? Or will Chinese firms adapt nimbly to automation and remain fearsome competitors? They might, but Chinese robots may be no cheaper than robots elsewhere.

Finally, will the shift to a more capital-intensive capitalism throw legions of workers onto the streets? The Chinese authorities will be watching nervously.

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MBA diary: California dreamin': Applying to business school can take over your whole life, says Temi Olatunde.

“THIS should be straightforward,” I thought, after deciding to apply for an MBA. With a degree from a renowned British university and several years’ work experience in a leading investment bank, I believed I knew how to get into a top MBA programme. You’ve probably already guessed that securing a place at business school proved to be more testing than I anticipated. Selecting my target schools was not an issue. I wanted to look beyond the smoke and mirrors of GMAT averages, salary stats, career placement profiles, student satisfaction surveys and rankings. I honed in on the schools which would take me out of my comfort zone. I was drawn to Stanford Graduate School of Business. Its programme was rigorous and its Silicon Valley location appealing. But most importantly it was also flexible, allowing me the latitude to craft my academic experience.

The first challenge was juggling the twin demands of my banking job—where I’d just changed roles—and GMAT preparation. I became GMAT-obsessed, poring over Stanford’s stats and playing the odds game in my head. But two weeks’ immersion, with no semblance of a social life, was enough to get me over this initial hurdle while retaining my sanity.

December was tough. My Christmas holiday in Cape Town was hijacked by the application process. Even obtaining recommendations—which I had anticipated would be one of the easier parts—posed a challenge, as I struggled to persuade my closest mentors of the value of an MBA. Equity-derivatives trading, it seems, is not a normal background for an MBA aspirant. Then the pressure of impending deadlines and incomplete essays intensified. The hallmark Stanford question “What matters most to you and why?”, which is often cited as the most difficult of all business school application essays, plagued my every waking hour. I worked to craft a compelling essay that both told my unique story and reinforced my “personal brand”. Knowing the answer was not enough, it had to be woven seamlessly into my overall application.

Panic set in the night before the second-round deadline. My stomach churned as I read the feedback from an alumnus who advised that I delay submission to the third-round. In his opinion I was not ready. Faced with the stiff odds, though, I was not willing to risk a delay, and so I braced myself for a long night ahead. At 5.45am I had no choice but to click the submit button. The final click was the hardest. Commonly reported feelings of relief or elation were absent. Instead, as I walked for my 6.00am train to the City, my mind frantically devised plans to recall the application.

I remember decision day vividly. I spent most of it online on MBA blogs, forums and websites. Then the tales of acceptance calls started to come through. They followed the sun: Asia first, extending westward through the afternoon and evening. Needless to say, when my phone rang, that single call compensated for the sleepless nights, countless essay revisions and nail-biting wait.

Temi Olatunde will be writing regular dispatches from the Stanford campus when the academic year starts in September.